Optimal harvesting under resource stock and price uncertainty

Abstract

We analyze optimal harvesting policy under stochastic price and stock dynamics. We state a set of weak conditions under which the optimal policy can be characterized by a single exercise threshold and show that the value of optimal harvesting and depletion policies can be expressed as the separable form according to which only the current price and the expected per capita growth rate affect the threshold, while under risk neutrality volatility of price dynamics will have no effect. Uncertainty makes waiting valuable and the optimal threshold is higher when harvesting can be exercised only once than in the sequential case.